JP Morgan, an American multinational financial services firm, has estimated that Nigeria's net foreign exchange (FX) reserves fell to $3.7 billion as of the end 2022.

This is contained in the firm's latest report titled 'Nigeria: Reform pause rather than fatigue'.

Gross FX reserves represent the government's total holdings of foreign currency reserves. Net FX reserves deduct foreign currency liabilities from gross foreign currencies reserves.

According to Central Bank of Nigeria (CBN) data, the country's gross FX reserves stood at $36.61 billion as of end of 2022.

In its report, JP Morgan said the $3.7 billion figure is significantly lower than prior estimates, owing to larger-than-expected currency swaps and borrowing against existing reserves.

"Based on partial information from the audited financial accounts, we estimate that CBN's net FX reserves were around $3.7 billion at the end of last year, from $14.0 billion at end-2021," the report stated.

The firm clarified that it arrived at $3.7 billion by making some assumptions which if incorrect would change the estimated figure.

"In arriving at said estimate we make a few assumptions which if incorrect would substantially change the picture," the report further read.

JP Morgan, however, said that although low net FX reserves mean continued FX market pressures, CBN still has the ability to source FX at commercial and semi-commercial rates.

"Given the highly profitable nature of the currency swap arrangements between the CBN and domestic commercial banks, we expect these to continue for some time, albeit in smaller sizes and arguably more punitive rates,' the report added.